Kalyani Group in recast mode, to consolidate arms

MUMBAI: The Baba Kalyani Group is undergoing a restructuring exercise which would entail the consolidation of its investment arms. The group is looking at demerging the investment division of Kalyani Steels (KSL), a group company, and merging it with another group entity, BF Utilities.

BF Utilities itself was formed after the financial services and wind mill divisions of Bharat Forge, the group flagship, was demerged in 2001. The company also has substantial real estate holdings. While officials were hesitant to share details on KSL's investment division, ET learnt that the company, through its subsidiaries, has investments of around Rs 3,000 crore in other group subsidiaries, which is much higher than the company's market cap of Rs 1,804 crore. Subsidiaries of KSL such as Chakrapani Investments & Trades, Surajmukhi Investment & Finance and Gladiola Investment together hold about 16% stake in BF Utilities and 14.22% stake in Bharat Forge. KSL also has a 34.19% stake in Hikal.

KSL's executive director CG Patankar confirmed that the company is looking at the "possibility of demerging the investment division of the company. We have appointed an agency to advise us on the same. The demerger will be subject to the advisor's report. As per the merits and demerits of the merger, the company will take a decision," he said. He, however, refused to comment on KSL's investment division being merged with BF Utilities. "The agency is yet to come up with its report and I can't say anything more on this." An e-mail sent to him remained unanswered.

Sources close to the development said KSL's steel business could be merged with Bharat Forge, the country's biggest forging company. However, this could not be confirmed and Mr Patankar denied any such plans. "The broad contours of the restructuring have been prepared. But it will be too early to go into the details," said sources.

KSL makes carbon and alloy steels for forging and engineering and largely caters to Bharat Forge. The merger, if and when done, would result in the backward integration of Bharat Forge's operations.

Though BF Utilities was set up to "satiate the power requirements of the Kalyani Group," the company is more known as a real estate player in the finance markets. In four years, the company's stock has seen an astronomical rise, from Rs 7 to its close of Rs 2,650 on Wednesday. The rise, remark analysts, is fuelled by the company's real estate interest and it is believed to have access to at least 1,000 acres of land.